Good news– debt and deficits don’t matter anymore

This post from Chait is ostensibly about what Democratic strategy should be in opposition (I’m still not fully convinced by the competing arguments out there). But what there is absolutely no doubt about is the Republican cycle on debt being bad during Democratic presidencies and just fine during Republican ones. He lays it out here:

Republicans blew up the deficit under Ronald Reagan, then fomented hysterical warnings of insolvency under Bill Clinton. When Clinton’s policies structurally balanced the budget, they unbalanced it with massive tax cuts, a military and security buildup, and a prescription drug benefit, all entirely debt-financed. When the first signs of recession appeared in early 2008, Republicans did support a Keynesian stimulus bill. As Obama entered office, the seeming mild recession that had spurred both parties to action a year before had spiraled into a bottomless crisis unlike any in memory. But at the moment the justification for Keynesian stimulus had become stronger than at any time in the previous 80 years, Republicans embraced austerity, insisting temporary deficit spending would worsen the economy. They held to that stance — with the exception of tax cuts for the rich, which they support regardless of circumstance — throughout Obama’s presidency, which is why they blocked infrastructure spending despite its appeal to the U.S. Chamber of Commerce and other business groups.

The cycle has been repeated enough times that careful observers simply assume that the GOP will immediately flip from debt hysteria to debt mania. House Majority Leader Kevin McCarthy told reporters today he still “cares” about the debt, but has realized that economic growth is a priority that will help resolve it — a realization that somehow dawned in the immediate aftermath of the election after eluding him throughout Obama’s two terms. This is a major reason the stock market has taken Trump’s election with such equanimity: The government is no longer held hostage by an opposition party committed to tight fiscal policy. Steven Blitz, chief economist at Pangea Market Advisory, told The Wall Street Journal that he had previously worried the economy would tip into recession, but that new debt-financed tax cuts and spending would allay such a scenario: “Now that Republicans are in control, there’s no concern about debt and deficits,” said Steven Blitz, chief economist at Pangea Market Advisory.

Again, this reversal has no relation to actual economic conditions. The unemployment rate is now half the level it was at the outset of Obama’s presidency, when Republicans opposed fiscal stimulus. For Democrats to cooperate unconditionally with this strategy is to institutionalize a political order in which Democratic presidents must be punished with contractionary policy while Republicans are rewarded with expansionary policy. Reasonable people can disagree about what level of national debt can be sustained, but the figure is finite. The political system seems to passively accept that America’s long-term debt should be allocated toward the goal of maximizing growth exclusively during Republican administrations. Why Democrats would find this system good for their country, let alone their party, is difficult to understand.

Of course because of existing asymmetries in the approach to government, Democrats will probably let Republicans get away with this. And, yes, I’ve said there’s not much to be gained by emphasizing hypocrisy in politics– it’s just part and parcel. But this goes far beyond run-of-the-mill hypocrisy and has huge implications for public policy under both Republican and Democratic presidents.